Creating a pricing method is essential when the project is at the pre-construction stage. Most often, contractors opt for fixed-price demolition or a contract with progression pricing. Fixed-price demolition is a pricing method that sets a total cost that includes all the activities related to construction. This contract is also known as a lump sum contract since people know about the amount of the demolition work.
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| Fixed Price Demolition |
A fixed-price demolition demands a total amount of all the upcoming project activities; a few of these contracts include benefits from early penalties and termination for a delay in termination to offer the contractors incentives to ensure that the project is done within the scope and on time. The contractor will calculate the total material and labor cost and ends the project for the set price, regardless of the actual cost. Because of unavoidable demand costs, the contractors charge higher than the market price for the specific job.
The cost also reflects the amount of risk the contractor is taking by agreeing to a fixed-price demolition, but some contractors cover the risk by setting up a higher cost. Moreover, it is claimed that using a fixed price demolition benefits both parties as the dealing involves less paperwork and administrative oversight.
Benefits Of Opting For Fixed-Price Demolition
Not just one, there are several benefits of choosing fixed price demolition over other contracts. One main reason includes
- Simplicity- Companies will pay higher charges to avoid dealing with the material cost and daily billing contract. Both parties know the accurate price of the construction.
- Free From Additional Workload- As the contractors can charge an amount on the project, the companies can avoid being caught in slow processing. It offers the contractors more freedom for daily activities.
Problems That May Arise During The Process Of Fixed Price Demolition
Along with benefits, this contract also has issues you may face during commercial construction.
- It's tough to predict an accurate cost; as a result, the contractor can also bear losses.
- Some contractors are charging higher than the market value to cover the unexpected cost; as a result, people are avoiding this contract.
- Contractors can also use cheap materials to earn additional profit. They can complete the project on time by using unfruitful elements to increase profit earning.
- If you are opting for fixed-price demolition, make sure you have a clear vision of the contract and its terms and conditions that you agree to.
Contracts Other Than The Fixed Price
Most of the time, fixed-price contracts are used, but apart from this contract, a few other agreements are attached to the industry.
- Cost-Plus Contracts: These are alternative contracts that calculate the payment of actual purchases, costs, and expenses from any project activities. This contract includes the contractor's fee and the expected profit earned from this project. These projects are best for places where the scope is not visible.
- Time And Material Cost: This contract is also used in the construction industry; it includes a fixed rate (daily or hourly) and expenses that can arise during project completion.
- Unit Pricing Contracts: These are primarily used in federal agencies that set a price during the bidding process. It is suggested not to opt for this type of contract in commercial construction.
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| Fixed Price Demolition |
Wrapping it up !!!
Fixed price demolition is considered to be the best contract in the construction industry. It’s because of its widespread use and straightforward nature. It is crucial to consider the drawback and benefits of the fixed-price demolition and to be clear about the scope and budget with the contractor before proceeding further.
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